Rs 550 Crore For Recapitalisation Of 36 Rrbs Likely

The finance ministry is in favour of granting Rs 550 crore during the Tenth Plan period for the full recapitalisation of 36 regional rural banks (RRBs). The amount will be provided by the Centre as additional share capital for the RRBs.

The finance ministry and the Planning Commission had agreed to provide an assistance of Rs 200 crore to the RRBs during 2000-01 out of the anticipated general savings.

However, during the recapitalisation of 158 RRBs, the government could not provide the complete funds to 29 RRBs and the bailout of another seven had not been taken up.

The RRBs which have not been taken up for recapitalisation so far, need higher assistance than those which have already been bailed out.

The finance ministry is of the opinion that the recapitalisation measures of the RRBs have been successful and have brought an improvement in their performance.

"Abrupt stoppage of the recapitalisation process has affected the performance of the big RRBs functioning in the underdeveloped and the poor regions of the country," official sources told Business Standard.

The financial results for 2000-01 indicate that the RRBs are on the road to becoming full-fledged financial intermediaries.

During 2000-01, 170 RRBs earned a cumulative profit of Rs 680.78 crore as against only 32 RRBs earning profits of Rs 29 crore during 1994-95.

Whereas, during the same period, the number of loss-making RRBs has dropped from 164 to 24.

Their cumulative losses have come down from Rs 423 crore in 1994-95 to Rs 71.66 crore in 2000-01.

The RRBs are sponsored by the public sector banks to cater exclusively to the rural areas with small and marginal farmers, agricultural labourers and cooperative societies, artisans and small entrepreneurs as their target segment.

They are not permitted to offer demand draft and locker facilities to the customers or to make advances in non-target groups.